[Federal Register Volume 71, Number 238 (Tuesday, December 12, 2006)]
[Rules and Regulations]
[Pages 74469-74471]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-9602]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 216 and 252

RIN 0750-AF44


Defense Federal Acquisition Regulation Supplement; Labor 
Reimbursement on DoD Non-Commercial Time-and-Materials and Labor-Hour 
Contracts (DFARS Case 2006-D030)

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Interim rule with request for comments.

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SUMMARY: DoD has issued an interim rule amending the Defense Federal 
Acquisition Regulation Supplement

[[Page 74470]]

(DFARS) to provide policy for reimbursing labor costs on competitively 
awarded DoD non-commercial time-and-materials and labor-hour contracts.

DATES: Effective Date: February 12, 2007.
    Comment Date: Comments on the interim rule should be submitted to 
the address shown below on or before February 12, 2007, to be 
considered in the formation of the final rule.

ADDRESSES: You may submit comments, identified by DFARS Case 2006-D030, 
using any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: [email protected]. Include DFARS Case 2006-D030 in the 
subject line of the message.
     Fax: (703) 602-0350.
     Mail: Defense Acquisition Regulations System, Attn: Ms. 
Robin Schulze, OUSD (AT&L) DPAP (DARS), IMD 3C132, 3062 Defense 
Pentagon, Washington, DC 20301-3062.
     Hand Delivery/Courier: Defense Acquisition Regulations 
System, Crystal Square 4, Suite 200A, 241 18th Street, Arlington, VA 
22202-3402.
    Comments received generally will be posted without change to http://www.regulations.gov, including any personal information provided.

FOR FURTHER INFORMATION CONTACT: Ms. Robin Schulze, (703) 602-0326.

SUPPLEMENTARY INFORMATION:

A. Background

    This interim DFARS rule supplements the final Federal Acquisition 
Regulation (FAR) rule published in Federal Acquisition Circular 2005-
15, under FAR Case 2004-015. The FAR rule clarifies payment procedures 
for non-commercial time-and-materials and labor-hour contracts, and 
prescribes the following three options for establishing fixed hourly 
rates on competitively awarded non-commercial time-and-materials and 
labor-hour contracts:
    (1) Separate rates that include profit for each category of labor 
performed by the contractor and each subcontractor, and for each 
category of labor transferred between divisions, subsidiaries, or 
affiliates of the contractor under a common control.
    (2) Blended rates that include profit for each category of labor 
performed by the contractor and its subcontractors, and labor 
transferred between divisions, subsidiaries, or affiliates of the 
contractor under a common control.
    (3) Any combination of separate and blended rates for each category 
of labor.
    The FAR rule also authorizes agencies to select, and make 
mandatory, one of the three options at the agency level. DoD believes 
it is in the best interests of the Department to select, and make 
mandatory, the option requiring separate fixed hourly rates that 
include profit for each category of labor performed by the contractor 
and each subcontractor, and for each category of labor transferred 
between divisions, subsidiaries, or affiliates of the contractor under 
a common control. The reasons for selection of this option include--
    (1) The relatively large dollar value of many DoD non-commercial 
time-and-materials and labor-hour contracts;
    (2) The significant oversight and legislative initiatives that have 
focused on DoD in recent years; and
    (3) The preponderance of DoD non-commercial time-and-materials and 
labor-hour contracts performed by traditional DoD contractors and 
subcontractors, who already have the necessary mechanisms in place to 
establish separate fixed hourly rates for each performing entity 
without significant administrative burden.
    This rule was not subject to Office of Management and Budget review 
under Executive Order 12866, dated September 30, 1993. In accordance 
with established rulemaking procedures, DoD will coordinate with the 
Office of Management and Budget regarding public comments received in 
response to this interim rule prior to the issuance of a final rule.

B. Regulatory Flexibility Act

    This rule may impact a substantial number of small entities within 
the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. 
DoD has prepared an initial regulatory flexibility analysis, which is 
summarized as follows:
    The objective of the rule is to select the FAR option for 
establishing labor rates that is the most suitable for DoD 
competitively awarded, non-commercial time-and-materials and labor-hour 
contracts. The legal basis for the rule is 41 U.S.C. 421. The rule will 
apply to all entities interested in receiving DoD competitively awarded 
non-commercial time-and-materials and labor-hour contracts. The impact 
on small entities is unknown at this time. DoD believes that, for non-
commercial time-and-materials and labor-hour contracts, it is in the 
best interests of the Department to require use of the FAR option that 
provides for the establishment of separate fixed hourly rates for each 
category of labor performed by the contractor and each subcontractor, 
and for each category of labor transferred between divisions, 
subsidiaries, or affiliates of the contractor under a common control.
    A copy of the analysis may be obtained from the point of contact 
specified herein. DoD invites comments from small businesses and other 
interested parties. DoD also will consider comments from small entities 
concerning the affected DFARS subparts in accordance with 5 U.S.C. 610. 
Such comments should be submitted separately and should cite DFARS Case 
2006-D030.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply, because the rule does 
not impose any information collection requirements that require the 
approval of the Office of Management and Budget under 44 U.S.C. 3501, 
et seq.

D. Determination To Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense that urgent and compelling reasons exist to publish an 
interim rule prior to affording the public an opportunity to comment. 
This interim rule provides policy for reimbursing labor costs on 
competitively awarded DoD non-commercial time-and-materials and labor-
hour contracts. DoD believes it is in the best interests of the 
Department to require the establishment of separate fixed hourly rates 
for each category of labor performed by the contractor and each 
subcontractor, and for each category of labor transferred between 
divisions, subsidiaries, or affiliates of the contractor under a common 
control. The reasons for this decision include--
    (1) The relatively large dollar value of many DoD non-commercial 
time-and-materials and labor-hour contracts;
    (2) The significant oversight and legislative initiatives that have 
focused on DoD in recent years; and
    (3) The preponderance of DoD non-commercial time-and-materials and 
labor-hour contracts performed by traditional DoD contractors and 
subcontractors, who already have the necessary mechanisms in place to 
establish separate fixed hourly rates for each performing entity 
without significant administrative burden.
    Comments received in response to this interim rule will be 
considered in the formation of the final rule.

[[Page 74471]]

List of Subjects in 48 CFR Parts 216 and 252

    Government procurement.

Michele P. Peterson,
Editor, Defense Acquisition Regulations System.

0
Therefore, 48 CFR parts 216 and 252 are amended as follows:
0
1. The authority citation for 48 CFR parts 216 and 252 continues to 
read as follows:

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

PART 216--TYPES OF CONTRACTS

0
2. Section 216.601 is added to read as follows:


216.601  Time-and-materials contracts.

    (e) Solicitation provisions. Use the provision at FAR 52.216-29, 
Time-and-Materials/Labor-Hour Proposal Requirements--Non-Commercial 
Item Acquisition with Adequate Price Competition, with 252.216-7002, 
Alternate A, in solicitations contemplating the use of a time-and-
materials or labor-hour contract type for non-commercial items if the 
price is expected to be based on adequate competition.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
3. Section 252.216-7002 is added to read as follows:


252.216-7002  Alternate A, Time-and-Materials/Labor-Hour Proposal 
Requirements--Non-Commercial Item Acquisition with Adequate Price 
Competition.

    As prescribed in 216.601(e), substitute the following paragraph (c) 
for paragraph (c) of the provision at FAR 52.216-29:

ALTERNATE A, TIME-AND-MATERIALS/LABOR-HOUR PROPOSAL REQUIREMENTS--NON-
COMMERCIAL ITEM ACQUISITION WITH ADEQUATE PRICE COMPETITION (FEB. 2007)

    (c) The offeror must establish fixed hourly rates using separate 
rates for each category of labor to be performed by each subcontractor 
and for each category of labor to be performed by the offeror, and for 
each category of labor to be transferred between divisions, 
subsidiaries, or affiliates of the offeror under a common control.

[FR Doc. 06-9602 Filed 12-6-06; 9:16 am]
BILLING CODE 5001-08-P